Moody’s lowers Fender

Moody's Investors Service said it trimmed Fender Musical Instruments Corp.'s corporate family rating to B2 from B1, the probability of default rating to B2-PD from B1-PD and the senior secured term loan rating to B3 from B2.

“The rating downgrades reflect Fender's higher-than-anticipated financial leverage driven by lower profitability during the first nine months of 2022 amid a challenging operating environment. Inflationary pressures and a normalization of out-of-home activities as pandemic conditions ease are weakening consumer demand for Fender's products and excess inventory in retail channels will make it challenging for the company to reduce its currently high financial leverage in the next 12 months,” the agency said in a press release.

Moody’s said it forecasts positive free cash flow of about $25 to $40 million in 2023, which it expects will be used to partially repay the balance on the asset-based lending revolver.

The outlook is negative.

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